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A Day Late and A Dollar Short Sale: Open Letter to a Lender

Dear nameless, faceless lending institution,

I am writing today to extend my deepest regrets that our clients have decided to purchase another home while you fumbled around with their offer for the past 8 weeks. You see, there is just so darned much inventory on the market, that when you take two months to respond to an offer on a short sale listing, buyers get a little fidgety. Happy feet take them to other properties while they wait for your verdict. In this particular instance, had you been just a wee bit more aggressive in expediting the matter, rather than basically letting the file collect dust for weeks on end, you would not be in the unenviable position of staring another foreclosure in the face. In fact, had you stepped it up just enough to accept or negotiate the offer one week earlier, we would have closed, and you would already have one fewer headache. Know what happened during week 8, though? It's funny really. Well, it is to me. As you were finally signing off on an acceptance, thus beginning our clients' 10 day inspection period, they fell head over heels in love with another home. Gorgeous property with sweeping desert and city light views. Great price too. Oh, and a seller who is willing to accommodate a 2 week closing for these CASH BUYERS.

So thank you for the belated acceptance. It was like getting that wedding gift months later. The one that you thought your third cousin had stiffed you on. Of course, as is usually the case in such instances, we had to return it for something we like a little better.

It's not you, it's us. We have grown apart during these last couple of months, and I'm ashamed to admit, we have been playing the field while we anxiously awaited your return from Rwanda, or wherever the heck you've been stationed with the paperwork. Consider this your "Dear John." Hopefully you will be a little more attentive to your suitors next time, lest you chase yet another CASH BUYER into the arms of competitor.

Best wishes in the future. I hope that we can still be friends. Of course, I'll be the friend who borrows your new skill saw and returns it with a frayed power cord and God knows what all over the blade. You see, the buyer we bring after the property comes back to you might not be much to look at. She will likely not be paying CASH, and very well might come within 100k of this offer if we are feeling generous. I tell you though, she's got a great personality!

Your friends,

Ray & Paul Slaybaugh

Realty Executives

(480) 948-9450

Scottsdale AZ Real Estate

P.S. Please stop sending me mailers for a line of credit. Isn't that what got you into this mess in the first place?

Posted by Paul Slaybaugh, Scottsdale AZ Real Estate on 04/13/2008 12:40 AM

Comments (41)

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Originally posted at: The Scottsdale Real Estate Files: A Day Late and A Dollar Short Sale: Open Letter to a Lender

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41 Comments on A Day Late and A Dollar Short Sale: Open Letter to a Lender

APR

2008

Paul- What a great letter to the lender. The lenders would not need a bail out nor take such a hit on their profit line if they would but streamline the short sale process. It is a simple solution to their mortgage crisis but many are inept at performing the duties required. We have multiple offers on all of our short sale listings, we expect and tell our sellers that the first buyer most likely will not be the buyer because they will find something else while waiting for an answer. We still love our short sales because here, it is our bread and butter:)

I love your no-holding-back posts! And, the lag of the bank is why the thought of a short sale buyer makes me cry.

I'm curious to know if there are enough short sales closing to even make it worth it to list them. I avoid them with my buyers... too much pain for likely no gain. (for the buyer)

Wow, blowing off ready, willing, CASH buyers....I wonder what the stockholders' would say about the additional losses. Cash offers should go on TOP of the heap, be processed asap and then problem sloved...off the books.

Very expressive letter, Dear John Lender....

Bravo!! I recently wrote one like this for the asset managers/banks that already have the foreclosed properties and don't maintain them.

Loved your "PS" :-)

Yes, the PS was a classic! WAY too much time involved with a short sale and alot of frustration on top of it!

Paul, great letter to many, many lenders and banks !

Lenders are not going to begin to improve their "short sale" processes and communications with buyers and seller AND AGENTS until buyers stop sitting on their offers and get out and find another property. Goodness knows there are a sufficient number of great properties on the market.

Mortgage companies and banks have really dropped the ball in this matter. They, as an industry, have had sufficient time to established guidelines for short sales. Yet, nothing appears to have improved in a year, a solid year.

It's a disgrace. It appears that the lenders have determined that, in many cases, the foreclosure sale and concomitant mortgage insurance gives them a better return.

I believe that the mortgage industry doesn't want the public/congress/fed/etc. to know that mortgage companies prefer foreclosure sales to short sales.

There's probably some tax benefit to the mortgage companies when they foreclose vs. short sale that the public hasn't yet grasped.

Amen brother! I've experienced the same crazy situation and it just makes you crazy. I think you should send it to all the lenders out there...and while you're at it, send it to Congress so let them know how the lending institutions are dropping the ball and making the situation worse!

Love it! This was the first post I read today and it's SO true. We discourage buyers from even looking at short sales for this reason.

Katerina: You are a brave soul to tread the short sale waters as a major part of your current business. I would hazard to say that only agents such as you and Nestor, who are adept at the process, should be listing short sale properties at this time. Too many agents, and I'm sure Lenn will agree, are letting short sale listings clutter the market because they don't know how the process works. Destined for failure and to drag the market down further. Thank you for your comment.

Dawn: Long time no see! Great to see you on AR. I generally avoid short sales if at all possible. My buyers generally lose interest when I explain the process and that the home is not necessarily even for sale at the listed price. I don't like moving targets, and I don't like tying my clients up in a market where there are choices-a-plenty.

Doreen: I just said much the same thing in my reply to Dawn. Most short sale listings are not real listings at all. Give me the seller who has years of equity to work with any day. The little old couple who purchased a home in 1970 often is a better avenue for the best value, without all of the hand wringing and delay.

Deborah: One would think. I just don't understand the foot dragging, especially in this instance. What changed in 8 weeks that allowed the bank to grudgingly accept the offer? They sat on it for two month ... and didn't even want to negotiate? Huh? Why not either accept it immediately to get it off the their backs months earlier (rather than missing 2 more months of payments from the current owner) or negotiate it? Seems to me that if the loss made the bank do that much soul searching, it would be better off to respond with a counter offer within the first week and attempt to hammer out a better deal. It boggles the mind.

Kris: They are a deserving target as well. There is a great property in the community I do a lot of work in that is priced a couple hundred thousand under market. The reason? The price started much too high, and now that the bank owns it, it looks terrible from the street. It has about 75k in remodeling inside, but nobody gets out of the car. So they had to crash the price. Dumb, dumb, dumb.

Leesa: I agree. Even for this buyer, who was looking for a second home and in no rush at all, the ordeal was too much. Somebody should also tell the bank that it is not wise to sit on an offer under even the best of circumstances, but in a declining market? It's suicide. 2 more months of depreciation under their belt in addition to more competition.

Missy: Thank you. I only hope they figure it out sooner rather than later. It would help us put this mess behind us.

Lenn: I have long suspected as much myself. There simply must be additional financial factors at play, because their negotiation and offer review patterns just don't make sense otherwise. I like to see the banks punished for this with a buyer walk away. The more it happens, the more likely the lesson will be learned by either the banks or the public. The banks will learn to act more like a seller, or the public will learn that short sales are fools gold.

Debra: Firing up the syndication mobile ;)

Karen: Thank you. I tend to do the same with my buyers. Not because I don't want the headache, but because I know it is not the best route for finding value for my clients.

Paul - Wouldn't your letter make a good zip form? Amanda Hall sent me her Seller's Invitation to Buyer to Submit a New Offer. I was pleasantly surprised to see it is a Texas zip form. I, too, have suspected that mortgage companies may get a tax break as Lenn suggested.

Best wishes to your CASH clients in their new home. It sounds like they will be very happy together. Too bad the other romance didn't work out -- for the bank. It also sounds like you were very diligent in your matchmaking efforts to put together a good union for these buyers and their new home. Congratulations!

P.S. You may not borrow any of my power tools. Ever.

Paul - Great job on this letter to a lender. I remember we spoke about this situation on the phone. You are a consummate professional, and I am happy to hear that your buyers found a better property for their needs.

Fantastic letter Paul. You my friend are starting to grow on me.

I don't want to know what is growing on Boney... TMI.

Paul, this is terrific! It's a shame that the lending institutions haven't figured out how to handle these short sales in a timely manner yet. I have to be honest and say when I see "short sale" in an MLS description, I keep on going. There are too many properties for my buyers to choose from to waste time and efforts like this.

Virginia: I love that idea! I'll see about adding this to the zipform library. I know my colleagues will appreciate it!

Elaine: Okay, no power tools. Got any bleach I can borrow?

Jason: Thank you, my man. They did indeed find something they liked better. The bank really shot itself in the foot by allowing them the time to do so.

JL: Thank you much. Word of caution, though. There is not an antibiotic around that can rid someone of me once I fully take root.

Lisa: How are you? I typically do the same thing. I'll mention the listings to my client with the caveat that short sales are widely a waste of time. Why wait for months on end for a response when there are so good and readily available values to be had?

Paul there is hope for us all. My relative works for a lender. We had a conversation, just today, about how her employer is reorganizing the short sale department. It wasn't running well because the load was not distributed properly. One case worker had 500 loans to service while another had 30. The changes made will help the process because they are losing money.

No you cannot have her number or email address. She is a good person, really!

Paul, Great letter! I guess I will have to send a similar one for an offer that is still hanging out there. My buyers have found another (better and less expensive) home while waiting and will be closing on it soon. Short sales drive me crazy!!

APR

2008

Hi Paul, May I use this letter? I have only one buyer who has not followed my advise and insisted that we pursue a short sale. It has been 6 weeks and they are now ready to give up . The problem is the new property they identified for me is another short sale. I would love to have you permission to use a modified version of this letter, first to send to the Buyer ( Do you suppose they would get the message?) and then actually send to the lender. Great post and one that should be published in REALTOR magazine.

Paul, What a great way for me to start the day.... a little chuckle from a friend. I stay away from short sales and foreclosures for this reason.

P.s. I see the sun today.... but pinnacle peak is no where in site.

Paul, What a great way for me to start the day.... a little chuckle from a friend. I stay away from short sales and foreclosures for this reason.

P.s. I see the sun today.... but pinnacle peak is no where in site.

This is great...there are so many stories like this but yours is the funniest! :) Have a great day!

Paul, at least your cousin sent a gift! Some of us weren't that lucky!

Melody: A) That is really good news. B) You are wise not to proved contact information.

Roberta: Sounds like it's contagious! They'll figure out a way to streamline the process soon enough or they'll all go under.

William: If you can make any hay out of my letter, have at it, my friend. Thanks for the generous evaluation of my post.

Judy: I generally steer clear if possible, as well. Glad the sun is out for you, but Pinnacle Peak is calling. Come on back!

Kelly: Thanks! You have a great day, too.

Jeremy: True enough ... but my gift is in the mail, promise!

Paul Oh how I've missed reading your posts while I was away. Hugs you brilliant and silly guy! :)

I was just thinking to myself today, "Hey, where the heck is Shannon?" Good to have you back, especially when you call me brilliant!

What a great letter! I absolutely cannot imagine what a lender with an excess of foreclosed properties is thinking in turning away a cash buyer or any qualified buyer for that matter. Wouldn't the news media have a field day if they got wind of lenders preferring to foreclose rather than consider short sale offers in a timely matter! Incredible! I am glad yours buyers found something they love even more!

Dia Duit Paul,

Great post as usual. I totally agree, not a lot of buyers have 3-4-5-6 months of patience when buying a home. If they are in the market it is obvious what they want to do and that is buy a home. The more they have to wait the more that home becomes irrelevant and other homes become their new target.

P.S

Hope all is well and your doing good. Keep up the good work

Dia Duit Patrick,

Good to hear from you, my friend. I am doing well on the rare occasions that my older son is not trying out inventive new ways to maim himself. How about yourself?

APR

2008

Paul- And the agents who don't know also have no idea on how to price them. So they start out too low and then generate offers that are only going to get turned down by the bank when the BPO is returned. You must understand alot about appraising property to price it right plus use strategies. Nestor had to take appraising as part of his real estate licensing course in Texas. He learned a lot from that class and has been right on the mark every time, even when no one believes him. ( that' s another story!)

Paul - I hear you on this, just went through this recently too. In the end my buyers wound up with a much better property as well and it was for the best but overall the process in unbelievably frustrating.

APR

2008

Nice letter, The banks are doing bad business. I think they know real estate is not that easy now and stay out of it in the future.

[quote]

I'm curious to know if there are enough short sales closing to even make it worth it to list them. I avoid them with my buyers... too much pain for likely no gain. (for the buyer)

04/13/2008 01:07 AM

by Doreen McPherson ~ Phoenix Arizona Real Esta

[/quote]

You can't steer buyers away from short sales (unless you have a money tree in your backyard to pay fair housing fines with). Educate the buyers on the whole short sale process. Right up front I lay out the pros and cons. In our area it could take as much as three months to hear back from a bank ON AVERAGE. That's con # 1. Then of course the property is AS IS. That's con #2. Then something which just recently happened to someone in our office is the kicker. They had jumped through all the hoops and received an accept from the bank and a settlement date. One week prior to settlement, the bank decided to change it's mind, and guess what... THEY CAN DO THAT. No legal recourse, just decide that a foreclose is better for them.

The other edge of this sword we are seeing is the buyers banks are now starting to require a second appraisal with these short sales dragging out so long. Yet another torpedo that might sink the deal. Remember, the bank employees are safe and secure punching a timeclock. They are not motivated to expedite anything. Second, when your ratified buyer/seller offer goes into the bank for their 'third party approval' it goes on the heap and is addressed in the order in which it was received.

But as to avoiding the short sale, if you have a buyer with a time sensitive deadline, that is about your only argument for taking those out of the batch of searches. Otherwise, they are entitled to see everything which is available on the market. Some have the luxury of time and need the very bestdeal they can get to acquire a property. So be very careful not to do a disservice to your clients.

Finally, for us Realtors, short sales are a ton more work, but a fact of business at this present time. I have yet to list one, but I see the writing on the wall. Start educating yourself today and note any places to streamline the process. I had an agent on the sellers short sale side who was very proactive sending the contract to the title company immediately for a pre HUD 1 with a settlement date. Then sent that onto the bank with the offer. In fact everything that they would eventually ask for and need that she could provide was sent with the offer. This is thinking outside of the box.

I don't think anyone here is talking about steering their clients, Rob (or Jeannie). I take Doreen's comment to mean that she dissuades her clients from getting bogged down in the short sale process if at all possible due to the unlikeliness of a successful purchase. She's a pro. Not sure fair housing guidelines regarding steering apply to the financial circumstances of the seller, but it is a point worth considering. As the majority of commenters have stated, I think the proper course of action is to show any property that suits the client's needs, but with a healthy dose of preparation for what to expect for an upside down property. While we certainly cannot steer towards or away from neighborhoods, we are responsible for providing a professional opinion on the individual properties available to our buyers. That's why they hire us, after all. While we attempt to avoid the trappings of fair housing violations, we can't skirt our duty to look after our clients' best interests either. By the time I explain the process of a short sale and the (un)success rate of actual closings, the majority of my clients opt not to pursue such properties. I thank you for raising this point for another avenue of discussion.

APR

2008

I wrote a similar letter (not quite as creative though) to an asset manager on a bank foreclosure. I'm in the process of writing #2. The once nice house has been vacant for a year, foreclosure process completed, my trash out bids emailed 2 months ago. The house deteriorates and the mold grows while I can only assume that the paperwork sits at the bottom of the asset managers pile.

It's no wonder they are in such a mess.

Great to see you, Linda. That makes me think of a home in a community that I work heavily. The bank was brutal to work with while they were attempting to sell it short. It was actually very nicely remodeled, and showed quite nicely initially. It went back to the bank, which promptly priced it way too high. Nearly a full calendar year later, the house is now an absolute steal at list price, but the landscaping has gone to pot. Most buyers aren't even interested in getting out of the car. Some institutions just do not get it.

Paul.. I gave the foreclosure short sales gig a rest to move on to more productive pastures. I have been preachin g for months to not waste good cash buyers on short sales. As your post states, with all the increase in inventory, its better to find a home that can actually be bought. Also, most REO properties are sold with clean titles and some maintenance may have been caught up. I just did a check on over 70 files that I left a few months ago, there has been one successful closing....Not very good odds .......

I have to agree very much with Lenn, the lenders are not wanting to actually sell the properties short. I feel there are many reasons, one of which is if all the short sales were allowed to go thru at one time, then we would have a greater crash of home prices than what we have seen....Meltdown may be a better term for what would happen.

SO, for anyone who is not Katerina & Nestor, the average is well over 80% of short sales do not work. With no apparrent ryhme or reason to guage your progress by, the majority of us find dealing in short sales a waste of valuable time for a qualified buyer..Nice Post...For all the humor and wittiness of your post, it carries a large amount of serious truth for all to listen to..Best Wishes Paul

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